Deputy Prime Minister: Do not let good businesses lose business opportunities due to lack of capital

At a meeting with ministries, localities and businesses on August 10, Deputy Prime Minister Nguyen Van Thang said that access to credit is still a bottleneck for businesses, especially interest rates, collateral, procedures, appraisal methods and problems with land, construction investment, and the market.

Meanwhile, the economy’s capital needs are increasingly growing for double-digit growth. According to him, capital must come to “the right place – time – object – purpose and at a reasonable cost”. Credit not only needs to increase in quantity but must create new production capacity, productivity and growth motivation.

“We must support difficult businesses to be able to recover, not let good businesses lose business opportunities due to lack of capital,” said the Deputy Prime Minister. He suggested that credit institutions prioritize dealing with businesses that have good financial situations and business plans but lack capital and are facing temporary difficulties.

Government leaders noted that for businesses facing temporary difficulties but having markets, orders and the ability to recover, banks need to coordinate in developing appropriate cash flow and loan structure plans and consider additional capital. At the same time, banks need to increase consulting for businesses right from the time of developing production and business plans, providing guidance on completing documents, providing financial transparency and improving access to capital.

“Banks are not just loan providers but must become financial partners accompanying businesses,” he said.

According to Deputy Governor of the State Bank Nguyen Ngoc Canh, the credit growth target for the entire system this year is about 15% and can be adjusted on the basis of inflation control, macroeconomic stability, and system safety.

By the end of July, outstanding debt across the economy reached nearly 20.3 million billion VND, an increase of 8.98% compared to the end of last year. Of which, outstanding debt to businesses is nearly 11 million billion VND, equivalent to 53.3%.

However, the State Bank assesses that the need for capital for growth is very large, especially medium and long-term capital to implement key national projects and works. Meanwhile, banks’ mobilization sources are mainly short-term and grow more slowly than credit. This puts pressure on interest rates, as well as the balance problem between growth support and macroeconomic stability.

From August, this agency requires commercial banks to deploy preferential credit packages for small and medium-sized enterprises, the sector that creates the driving force for growth. Currently, four banks have registered to participate, with an expected scale of about 210,000 billion VND, with interest rates lower than the current level.

Although credit throughout the system has increased significantly, Mr. Dau Anh Tuan, Deputy General Secretary of the Vietnam Confederation of Commerce and Industry (VCCI), said that many manufacturing, small and medium-sized, agricultural, forestry and fishery enterprises still have difficulty borrowing or have to bear high costs.

According to him, businesses not only need low interest rates but also need long-term, stable and predictable capital sources to proactively calculate production and business costs.

Another bottleneck reported by businesses is that credit still depends heavily on mortgaged real estate. According to Mr. Luu Cong Thanh, Vice President of the Vietnam Young Entrepreneurs Association, lending based on cash flow, contracts, invoices or goods is limited due to the lack of verifiable data and appropriate scoring models.

“Enterprises do not request to lower credit standards but wish to be evaluated more fully, based on cash flow, orders, management capacity and technology,” Mr. Thanh said.

To increase capital supply, Deputy Prime Minister Nguyen Van Thang said that banks need to change their approach, not using one credit product or appraisal method for all businesses. Because, the characteristics of manufacturing, trading, exporting, construction, technology or agricultural enterprises are very different.

According to him, credit institutions need to design products according to industry, value chain, cash flow and risk level. Tax data, electronic invoices, payment accounts and credit history need to be exploited more in appraisal.

Collateral is still necessary to control risks, but according to the Deputy Prime Minister, it should not become the only condition that decides whether a business can borrow or not.

“We need to gradually shift from the mindset of what assets a business has to mortgage to the mindset of a business having a business plan, cash flow and ability to repay debt,” he said.

In addition, the Deputy Prime Minister also asked banks to continue reducing operating costs and digital transformation to create space to reduce interest rates. But instead of just looking at the announced interest rates, regulators and banks must pay attention to the actual total cost of capital that businesses must pay, including fees and related expenses.

The Deputy Prime Minister requested to completely resolve bottlenecks outside the bank. Accordingly, he noted that problems in the banking industry will be handled by the State Bank and credit institutions. As for problems in ministries and localities, the corresponding agencies must proactively resolve them. With problems stemming from internal capacity, businesses must overcome them.

“Do not let businesses have to go to many places, ask many agencies but no one is responsible,” he said, requiring petitions to clearly identify people, tasks, deadlines, responsibilities, results and be handled to the end.

Along with opening up credit, the Deputy Prime Minister said that the banking system “cannot and should not be the only source of capital for the economy”. Therefore, he assigned the Ministry of Finance to coordinate with relevant agencies to develop the stock market, corporate bonds, investment funds and international capital sources. Groups, corporations and large enterprises with long-term investment needs must also proactively diversify mobilization sources, gradually reducing dependence on bank credit.